"Minpaku" is finally legal
On June 9, 2017, after passing the Upper House, the Vacation Rental Business Act was enacted. This puts an end to a longstanding question about whether a vacation rental business (called Minpaku in Japanese) is legal in Japan. The new Act is expected to be effective within one year from the enactment, possibly by January 2018.
Currently, under the Hotel Business Act, a hotel license is required to conduct business activities that make accommodation facilities available. This means that anyone who provides accommodation for fees without a hotel license could be in violation of the existing Act. The question is then whether a vacation rental, which is merely renting a residence for a short term, is considered to be the same as providing accommodation services. Unfortunately, the legislation reads broadly enough to justify an interpretation that even renting a residence for one night requires a hotel license. It sounds odd, but this sometimes happens when legislators could not envision how a regulated business would evolve after legislation. Vacation rental happens to be one of these cases, and its legality has been questioned over the last couple of years, when their presence drew the attention of the regulators.
With the government's strong desire to increase inbound tourists, and a possible surge of demand for accommodations for the 2020 Olympics, this legislation was passed surprisingly quickly. This regulates three players in the vacation rental business: the accommodation service provider, the accommodation facility manager, and the vacation rental broker.
Accommodation service provider
This refers to homeowners who rent their spaces for fees. Days of accommodation cannot exceed 180 days per year, or homeowners would need a hotel license. It isbitawkward as leasing properties does not requireany license. Presumably, the distinction between leases and the accommodations described here would depend on the length of stay by each renter (i.e., whether the space is rented for long-term residence or for short stay accommodations).
Accommodation service providers must submit notification to the governor of the prefecture prior to offering vacation rentals. While the form of the notification may not be designated by the relevant authorities until the Act becomes effective, it would include contact information for the provider and details of the property for rent.
Certain duties for sanitation, public safety, and foreign language accessibility are also the responsibility of accommodation service providers. The details of these responsibilities will be provided later by the relevant authorities. The accommodation service provider is also responsible for explaining preventive measures to be taken to maintain a safe and quiet environment in the property’s neighborhood, and dealing with any complaints received from the neighbors.
If the property has too much capacity to be managed by a single provider, the details of which will be set later by the authorities, the service provider will need to retain an accommodation facility manager. Such a manager will also need to be retained if the service provider is not physically present to look after guests during their stay.
Accommodation facility manager
An accommodation facility manager is a person or an entity that manages accommodation properties as a business. This requires registration with the Minister of Land, Infrastructure and Transport, where registration licensesmust be renewed every five years. Once an accommodation facility manager is retained, this manager will undertake the duties and obligations that an accommodation service provider is subject to on his or her behalf. In addition, the accommodation facility manager is subject to further obligations when engaging with accommodation service providers, such as refraining from misleading inducements and providing disclosure documents upon engagement.
Vacation rental broker
This refers to businesses offering matching services between travelers and homeowners. If a person or entity acts as an agent or broker for accommodation service agreements between travelers and accommodation service providers in exchange for fees, registration is requiredwiththe commissioner of the Japan Tourism Agency, or else this service will likely be unauthorized travel agency activities. Online rental vacation agents are likely to fall under this definition.
Conclusion
This new Act certainly clears the air for vacation rental brokers, but also limits their ability as they will be subject to supervision by the authorities once they do the registration. Meanwhile, this may open new business opportunities for property management services. Homeowners with extra space will also have the opportunity to earn extra income while offering travelers a place to stay. For individuals having invested in Japanese properties solely for renting purposes, it might make more economic sense to let the premises for long term leases consideringthe limitation on days of accommodation. Whether you like it or not, the Vacation Rental Business Act will make each parties’ responsibilities more clear.